Is Asian Paints' exit from Akzo Nobel a strategic cash move ahead of an urban demand revival?

Asian Paints has exited its 4.42% stake in Akzo Nobel India for ₹734 crore, selling its entire holding at ₹3,651 per share. The buyers include ICICI Mutual Fund and Eastspring Investments.

The sale price is notably higher than the ₹2,762.05 per share valuation at which the Sajjan Jindal-led JSW Group is acquiring Akzo Nobel India in a larger deal pegged at around ₹9,400 crore. It also exceeds the open offer price of ₹3,417.77 per share.

“This is a good price for Asian Paints,” said Abneesh Roy, executive director, Institutional Equities at Nuvama. “The company has managed to monetise its stake well above both the JSW acquisition price and the open offer, reflecting the premium its holding could command in the current market.”

Akzo Nobel India operates across a wide range of segments, including decorative paints, automotive and specialty coatings, industrial coatings, marine and protective coatings, yacht coatings, and powder coatings. In FY25, the company reported revenue from operations of ₹4,091.21 crore.

The transaction is expected to bolster Asian Paints’ cash reserves and may translate into higher shareholder returns. According to Nuvama, the ₹734 crore inflow is nearly 20% of the company’s FY25 profit, potentially paving the way for an increased dividend payout. Historically, Asian Paints has maintained a dividend payout ratio in the range of 50–60%.

While Nuvama maintains a ‘Buy’ rating on Asian Paints, it expects short-term sales growth in the paint sector to be led by Berger Paints and Indigo Paints in the June quarter. “That’s largely due to their stronger presence in Tier-2 and Tier-3 cities, where demand has held up better,” Roy said.

In contrast, Asian Paints, with its higher exposure to urban markets, is feeling the impact of the urban consumption slowdown. But Nuvama believes the worst is over. “We expect a gradual recovery in urban demand over the next one to two years,” said Roy.

Despite near-term headwinds, Nuvama remains positive on the overall paints sector and sees long-term growth returning, supported by a recovery in urban discretionary spending and structural demand in housing and home improvement.